Trump's agenda is driving America off a cliff —and he can't pump the brakes

The president's illegal and unpopular war against Iran is driving up the cost of gas so much that it seems all but certain that we're going to experience a inflationary recession. Core inflation, which excludes food and energy, rose in March to its highest level in three years. I'm not an economist. I don't know when. I don't know how. But I do know that for 60 days, there has been a bubble of magical thinking around Wall Street. It seems ready to burst.

Marketplace aired a frightening story last night about the difference between the paper price of oil and the real price. The former is determined by investors speculating on future oil supplies. The latter is determined by traders bidding on existing oil supplies. With the Strait of Hormuz shuttered up, existing supply is getting tighter. As it tightens, prices go up.

This is what Joe DeLaura, a senior energy strategist at Netherlands-based Rabobank, told Marketplace: "The physical market is skyrocketing. We've seen delivery for physical Brent crude going, you know, like $144. ... It's a divergence of what people think versus reality."

Donald Trump has been playing a game. So far, Wall Street has played along. He says the war is coming to an end. Any minute now Iran is going to reopen the strait. Investors wanted a return to the status quo. The alternative would be ruinous. So they believed him. Even now, as I'm writing this, he said Iran has a new proposal to end the war. On cue, oil futures fell.

That's little comfort at the gas station, where Americans pay real prices. As of today, the national average for a gallon of regular gas is $4.42. It's $4.30 in Florida, $4.84 in Indiana and $4.88 in Ohio. "Explosive gas price jumps in the last week," wrote Patrick De Haan, head of petroleum analysis at Gas Buddy. "Biggest jumps in average price: Indiana up $1.09/gal, Ohio up 94c/gal, Michigan up 88c/gal, Illinois up 56c/gal, Colorado up 47c/gal, Kansas up 39c/gal, Kentucky up 36c/gal, Florida up 34c/gal, Wyoming up 34c/gal, [and] Wisconsin up 33c/gal." It bears noting that Donald Trump won all but two of these states in 2024.

Dan Pickering, of Pickering Energy Partners, told Marketplace that "the financial markets are essentially saying over a period of time, the expectation is, peace is going to break out and that prices will come down. So I think that's what the market's telling us. My view is they don't reflect the tightness of the current physical market." This week proved was right.

He added that the paper price of oil will have to increase to match the real price. "The Strait of Hormuz is not opening," Pickering told Marketplace. "Our inventories continue to draw down literally every single day. And I think where we're headed is that physical tightness in one part of the world is going to meld into physical tightness across the world,” he said.

Trump is playing games with the rest of us too, as in: Don't believe your lying eyes. Energy Secretary Chris Wright told Congress last week that gas prices "peaked a week or so ago" prior to his testimony, which would have been mid-April. He also bragged. Gas was "a dollar a gallon cheaper than they peaked during the Biden administration." On Thursday, the national average, $4.30 per gallon, reached its highest since July 2022. So much for bragging.

We have not reached the highest average price during the Biden years, which was around $5 a gallon due to the war in Ukraine, but all things being equal, we are getting there, in a hurry, with the potential for surpassing that mark and sending the global economy into recession. One leading analyst is now willing to put a time table on that trajectory. Mohamed El-Erian was Pimco's CEO. He served in Barack Obama's White House. He told Fortune the world can “avoid a recession, provided ... the straits are reopened in the next four to eight weeks. If they’re not reopened in the next four to eight weeks, it will look very different.”

I can't predict the future, but I can predict that Trump is not going to change. He is who he is. That's why he can't win. Here's Paul Krugman: "Trump’s ego is so fragile that he can never admit losing. He cannot bear to face up to the reality that he, more or less single-handedly, led America to the greatest strategic defeat in its history. So he desperately wants to extract concessions from Iran that would lend him a fig leaf and allow him to claim victory."

But Iran isn't going to change either. Its leaders understand Donald Trump's weakness. They are not going to freely give up control of the strait. As Lindsay Beyerstein argued, control gives them more leverage over international rivals than even possession of a nuclear bomb would. ("Lots of countries have nukes," Lindsay wrote, "but only Iran has Hormuz.") Forget about self-defense. Iran will keep gas prices high – by throttling the Strait of Hormuz or extracting tribute – for as long as high prices give them a geopolitical advantage.Trump insisted today (ie, lied) that high gas prices will fall, but traders appear to be finally coming around to the fact that Iran has been a more reliable source of information that the American president has been. (He told Congress today that "hostilities" have "terminated" before the 60-day deadline. Also today, he said he was "not satisfied" with Iran's new proposal to end the war.) They believe Iran, but not Trump, a dynamic that has led investors to using the acronym "NACHO" in reference to him, as in: "Not a change Hormuz opens."

A return to normal in four to eight weeks? Optimistic.

Trump can't see the danger he's in, or he won't see. His ego is titanic. But his party can. Fifty-five percent of GOP voters blame Trump for the immiserating effects of high gas prices. Harry Enten said that's the highest percentage of people from within one's party to blame the president for the price of gas. Summer is coming. Prices will climb higher, as will the rate of disapproval. In the fall, the Republicans better brace for impact. Even that, however, might be the least of their problems. Trump is who he is. He's not going to change. There's another two years ahead of us. That's a long time for a growing majority to blame their president.

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